How does Bitcoin Mining Work?

bitcoin mining

Bitcoin mining has been a hot topic for the past years. Mining is the process through which Bitcoin blockchain is secured and run, allowing the decentralized network to function without the need for a single authority that verifies each transaction.

The industry of cryptocurrency mining has grown exponentially as more advanced hardware and software solutions are developed. As Bitcoin mining became increasingly harder for a simple crypto enthusiast, several other blockchains with other custom mining algorithms were developed, allowing for previous mining rigs to be reused.

In this article, let’s take a closer look at what Bitcoin mining is, how it works, as well as why it’s needed.

Also Read:
• How To Mine Bitcoin?
• Bitcoin Mining Pool
• How Many Bitcoins Are Left To Mine?
• Bitcoin Mining Software Guide
• Free Bitcoin Mining:Basic Steps & Tools

What is Bitcoin Mining?

Bitcoin mining is done with the so-called crypto miner, which creates blockchain blocks that store the Bitcoin transaction information. In return for mining, the Bitcoin mining pool receives a reward and a transaction fee from the transactions stored on the specific block.

As every blockchain block is linked by SHA-256 cryptographic hash, miners need a lot of computing power, which creates a lot of energy consumption to solve each hash. Every Bitcoin miner effectively competes against each other as the reward for each block found is given only to one of the miners. This mining process is frequently referred to as Proof of Work(PoW).

How does Bitcoin Mining work?

Today, Bitcoin mining is done with the so-called Application-specific integrated circuit (ASIC) miners. Essentially, ASIC miner is a specific Bitcoin mining hardware that runs Bitcoin nodes specifically built to mine the Bitcoin blockchain to return the mining reward.

Bitcoin miner power is often put together in a pool. This reduces the variance created by only one of the miners receiving the block reward, as the reward received is distributed across the pool depending on the hashing power provided.

As the network mining difficulty increases over time, due to miners competing on who can develop a more powerful and efficient miner, there is essentially a race on who can create a mining farm that can hash the most. Therefore, the margins for Bitcoin mining profitability tend to decrease over time, pushing small hobby miners out, as old mining rigs simply use too much power to remain profitable to be run.

How long does it take to mine 1 Bitcoin?

The time to mine each new block varies depending on the activity of the network. However, the average time target is set at 10 minutes. This 10-minute target is maintained by adjusting the hash rate difficulty based on the network’s recent performance. Therefore, Bitcoin`s network difficulty can vary over time.

Bitcoin Halving

As cryptocurrency mining is a continuous process, the total coin supply for the Bitcoin network slowly increases, creating inflation of total supply. Therefore, a feature called reward halving was implemented, which means that every 210,000 blocks, the reward for mining cryptocurrency is reduced by half.

Previous reward halving occurred on May 11th, 2020, with the new reward being 6.25 BTC per block. Next halving is expected around March 2024, as it takes approximately four years for the next set of 210,000 blocks to be produced. This effectively reduces mining operation profitability over time for the Bitcoin mining pool, creating the need for more efficient crypto mining solutions.

History of Bitcoin Mining

The first Bitcoin block was produced on the 3rd of January, 2009. The Bitcoin wallet that received the first block reward likely belongs to the Bitcoins creator – Satoshi Nakamoto. At first, Bitcoin’s mining difficulty was low, meaning that the creator likely produced it on a simple PC that powered a basic cryptocurrency miner software.How does Bitcoin Mining Work? 1

As BTC gained popularity over the following months, Bitcoin mining was mostly done with a simple mining rig build from regular CPU units. Over time CPUs were replaced by mostly AMD and Nvidia graphics cards (GPU), with specific Bitcoin mining software used to extract the maximum mining power while using the least amount of electricity. Later on, some of the resources were moved to hashing the Bitcoin Cash blockchain created in a hardfork of the original Bitcoin blockchain.

Over time, mining cost started to increase, creating the need to make more efficient mining machines. This resulted in Bitcoin miners starting to use renewable energy to reduce electricity costs. Further on, specific mining equipment was developed.

What is Bitcoin Cloud Mining?

As the Bitcoin network increased in popularity, some of the largest Bitcoin mining farm projects started to offer Bitcoin Cloud Mining service. The idea is that you purchase some of the hashing power from the farm. Therefore, you don’t have to maintain your own mining rig, while the mining farms lock in some of the potential profit. One of the best-known cloud mining services is offered by Genesis Mining, as they operate since 2013 and have established a good reputation in the market space.

Bitcoin vs. traditional currencies

Bitcoin network has grown in size and popularity over the past years exponentially. Therefore, many crypto enthusiasts believe Bitcoin and other cryptocurrencies have the power to replace or become a serious competitor to traditional currencies eventually. The digital currency offers less traceability as it is decentralized and the records of transactions are not stored by one entity, meaning your money cannot be lost due to a malware attack on a specific server or group of servers as with traditional currencies.

Is mining Bitcoin worth it?

To create new Bitcoin, a block of transactions needs to be mined. Over time the power consumption and processing power required has grown exponentially, meaning that Bitcoin mining is likely not worth the resources for a simple hobby miner. Therefore, Bitcoin mining is best left to mining farms as they can output more hash power while using less electricity.

Is Bitcoin Mining sustainable?

Bitcoin mining consumes a lot of electricity, which in return creates a lot of pollution and debates whether the proof-of-work algorithm is really required. According to recent estimates, Bitcoin mining will emit 130 million tons of Carbon in just China alone.

Over time, the amount of electricity needed to power the Bitcoin protocol will only continue increasing. Therefore, Bitcoin mining could become for many miners worldwide, especially for those with high electricity costs.


Overall, Bitcoin mining has become increasingly complex over the past years. At first, any crypto enthusiast could mine Bitcoin on their PCs by using CPU and GPU power. Over time, ASIC miners were developed, pushing out simple enthusiasts as more serious market players invested in hardware that could produce much hashing power while reducing the power consumption.

Other cryptocurrencies are still available to mine for smaller mining enthusiasts as they use different mining algorithms and restrict ASIC miners to maintain maximum decentralization. Therefore, while Bitcoin mining has increasingly become a business for large crypto-mining farms, smaller crypto enthusiasts can still mine other blockchains.

Bitcoin increasingly becomes more difficult to mine, and block halving reduces the reward in half roughly every four years. Bitcoin mining companies are always under pressure to continue developing their hardware. This means that over time, we could see Bitcoin mining become an extremely complicated and capital-intensive business.

This has caused concerns for the decentralization and sustainability of the network. However, as history shows, if there is a problem with good enough incentive to be solved, somebody will eventually find a solution to it. 

Shawn Du'Mmett

Shawn Du'Mmett

Former IT development and consultant, remote team and collaboration expert, PM, CCO, writer, dreamer, idealist looking to collaborate with global teams on a global teal/turquoise organisation. Shawn's dream is working together openly, to get what writers need and want, and to solve biggest global problems. He is building a collaboration system from the start that everyone can own and define, allowing them to work together, to decide how it works and to their highest ideals.

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